Nigerians should look for hidden value lurking in their domestic stock market as well as the developments in the cryptocurrency space like Bitcoin for potential investments, according to Erik Renander a Fund Manager at HI EMIM Africa.
“When you look at the equity market with the best returns over the past 2 years it’s the Zimbabwean stick market,” Renander said at an investment forum holding in Lagos.
“Domestic investors in Nigeria should take a closer look at their equity markets especially quality names like some banks that were trading at 50 percent of book value.”
Zenith Bank a major lender trades at 0.53 times book value, while Access Bank, one of the largest Nigerian banks by assets trades at a lowly 0.34 times book value.
Renander said the domestic equity markets usually surge following a devaluation of the local currency. Nigerian stocks have returned -5.03 percent year to date. The Central Bank of Nigeria (CBN) devalued the local currency the Naira from N306 per dollar to N380 per dollar in March.
While Domestic institutional and retail investors have largely become the main drivers of the Nigerian equity markets with 61 percent of transactions year to date, compared to 38.96 percent for foreign funds, a large chunk of available domestic pool of capital in the form of Pension Funds is still largely shunning equities.
Pension Funds exposure to domestic equities fell to N524.7 billion in June 2020, from N530.1 billion in May.
Another area investors should be focusing on is the rapid evolution of the cryptocurrency market, according to Renander.
“When you have a situation where people cannot easily move their money in and out of a country and the FX regime is opaque, cryptocurrencies like Bitcoin and Ether are often the go to choice.”
A recent report by data analytics firm Chainalysis, said Russia, China, South Africa, Nigeria, Kenya, and the U.S. are among the top-ranking countries by cryptocurrency adoption, according to its 2020 Global Crypto Adoption Index.